NNPC shortchanged Federation Accounts by N3tn- Reps investigation

2012-06-07
THE PUNCH Newspaper-Olusola Fabiyi

The House of Representatives Joint Committee on Finance, Petroleum Upstream, Petroleum Downstream and Gas Resources has recommended that the Nigerian National Petroleum Corporation should refund N3.08tn to the Federation Account.

The committee was on September 22, 2011 mandated to investigate how NNPC had been remitting oil revenues into the Federation Account in order to make accurate projection for the national budget.

It was also saddled with the responsibility of ascertaining NNPC’s level of compliance with the Constitution on the matter.

In its report, obtained by our correspondent on Wednesday in Abuja, the committee said the N3.08tn was the balance of funds the corporation under-remitted to the Federation Account between 2004 and 2011.

The committee said the corporation had no right to make direct deductions from the revenue accruing to the federation by hiding under Section 7 of the NNPC Act.

The report read in part, “In 2005, NNPC short-changed the federation by $193.645m through domestic crude sale at a discount of $1.211 per barrel on the 159,898,543 barrels of crude taken in 2005. The loss of $193.645m was an equivalent of N25.473bn based on the prevailing exchange rate then.

“NNPC further compounded the federation’s woes by under-remitting the under-invoiced domestic crude revenue by N289bn in 2005. Out of the total revenue of N1.145tn accruable to the federation from domestic crude oil sales to NNPC in 2005, NNPC remitted only N0.856tn.”

It added that since the corporation did not claim any liability on subsidy for 2005 against the Federal Government, it was wrong for it to lay claim to such.

NNPC had claimed a total liability of N354bn as at the end of December 2005 against the government, which the committee said was false.

“Instead, it was NNPC that was owing the federation the sum of N678bn through under-remittances,” the report stated.

The report also indicated that “between 2006 and 2008, NNPC short-changed the federation by N1.214tn through unauthorised discount and under-remittance of under-invoiced domestic crude revenue.”

On transactions between 2009 and 2011, the report stated, “NNPC in 2009 to June 2011 followed the same trend of taking unauthorised discount on domestic crude it allocated to itself and continued to underpay the under-invoiced domestic crude sales.

“While the federation lost N67bn on unauthorised discount between 2009 and June 2011, the loss through under-payment of under-invoiced value is N1.388tn, resulting in total loss to the federation of N1.455tn on domestic crude supplies to NNPC between 2009 and June 2011.”

The report added that based on NNPC’s audited accounts, it was clear that the nation lost over $3.675bn through false claims by multinational oil companies under dubious Carry Agreements.

According to the report, the Carry Agreements were the creation of the Joint Venture operators to confuse and create an avenue to short-change the nation.

It said though the Petroleum Support Fund was created in 2006 to take care of subsidy payments, NNPC should, however, not hide under it to make direct deductions.

Under general recommendations, the committee added that the Federal Government should, as a matter of urgency, review the whole concept of Carry Agreements with the international oil companies in order to reduce corruption and wastage.

The committee said, “That the four carry partners namely: Shell, Elf, Mobil and Chevron, whose over-bloated claims to reimbursement to $3.675bn between 2004 and 2006 should be made to refund the sum.

“That NNPC should refund the sum of N44.932bn, which it paid to itself as cash call in 2006. NNPC should refund the sum of $3.273bn, which accrued from 48 million barrels of crude, which the corporation concealed in 2006.”